Employee benefit plan drafters frequently complete plan documents for their client’s use assuming that the document’s status as an employee benefit plan under the Employee Retirement Income Security Act of 1974 (‘‘ERISA’’) or under the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), is definitive. The Ninth Circuit decision in Flores v. City of San Gabriel, (824 F. 3d 890 (9th Cir. 2016), cert. den’d 137 S. Ct. 2117 (2017)), which the U.S. Supreme Court permitted to stand, calls into question that assumption. A plan may not be a plan for all purposes. Failure to consider the company as a whole, as an employer and the implications of other federal laws may raise risks for the company. The Ninth Circuit reviewed whether payments made to employees as opt-out payments for electing not to take health insurance under a flexible benefit plan (Code section 12 plan, a/k/a a cafeteria plan) were excludable from the employee’s compensation and therefore not included a part of their regular rate of pay for purposes of calculating overtime pay under the Fair Labor Standards Act of 1938 (the "FLSA").

Originally published in Bloomberg Law Pension & Benefits Daily - November 28, 2017.